Sunflower market needs to replenish stocks, meet demands in 2018

2018 looks like it will be another challenging year in terms of marketing commodities.

Dec 07, 2017

By John Sandbakken

What a difference a year makes. The overall U.S. sunflower yield was the highest yield on record in 2016. But in 2017, both drought and extremely dry conditions occurred in much of the Dakotas and parts of Minnesota, which lead to a difficult growing season and left many in the trade scratching their heads about where the overall final yield would end up.

In its October estimate, USDA pegged 2017 sunflower production at 1.81 billion pounds, down 32% from the revised 2016 production of 2.65 billion pounds.

No estimates are out yet on 2018 oil-type sunflower acres, but industry analysts believe that acres will increase given the interest they are hearing from producers. Based on current demand and historical usage, a 15-20% increase in acres in 2018 can be easily absorbed in 2018 without impacting present prices to a great degree.

Several new domestic customers have added sunflower oil to their product mix. Export markets are growing as well, giving several market options to sell oil. Obviously, world events can change markets in a hurry. Based on the reduced 2017 oil-type production and product demand, though, the sunflower market should be aggressive in 2018 to get acres to replenish stocks and meet demand.

I know I will sound like a broken record, but from the looks of it, 2018 will be another challenging year in terms of marketing commodities. Margins will be tighter, so producers are going to have to buckle down and watch their marketing in the year ahead. You will also have to sharpen your pencil when it comes to figuring out the bottom line, as crops that were profitable last year may not be in 2018. It will also be important to watch the markets carefully to take advantage of market rallies when selling old crop and locking in new crop prices.

Crushers in the Northern Plains are offering both 2018 cash and Act of God contracts for NuSun and high oleic sunflower. NuSun is around $17.00-$18.15 per cwt. with high oleic in a range of $17.25-$18.25.

Something else to consider is the oil premiums that crush plants pay on sunflower. Sunflower is the only oilseed that pays premiums for oil content above 40%. Premiums are typically of 2% price for each 1% of oil above 40%. The gross return on sunflowers with 45% oil content would be 10% higher per cwt with the premium. An $18 contract would be $19.80 per cwt. and an $18.25 contract goes over $20 per cwt.